Venturebeat reports that Digg has taken a second round of financing for $8.5 million from it’s original set of investors. There are a few different threads surrounding this that make it interesting.
1. Gaming Digg
The Venturebeat story along with other blogs and media have focused on the controversy of people and businesses trying to game Digg. While it is an interesting story, Venturebeat seems to make a big deal out of the fact that the CEO of Digg denies that it’s happening or been successful. My thought, who cares? If people gaming Digg hurt the results of Digg, then users will notice and stop using it. Or, the more likely situation is that Digg keeps fighting it and will always have to keep fighting it but will keep it squashed enough to continue on as a valuable web property. There are far more people trying to game Google, Yahoo, eBay, and other sites. Has it stopped them from being successful?
2. Digg and Numbers
Another thread being talked about is questioning of Digg’s reported number of 20 million unique visitors with Comscore’s 1.3 million unique visitors and then how Alexa’s ranking of Digg holds with this. This is fairly important because it helps quantify Digg’s value and importance on the web. As Digg fairly points out, Comscore isn’t including much international nor RSS subscribers. Digg believes their traffic should be at least 3-4 times what Comscore reports because of this, but isn’t that still less than the 20 million they previously reported? Additionally, as Pete Cashmore at Mashable points out, Digg’s Alexa ranking of 76 is way overinflated as it’s a technology heavy crowd and many loyal Digg users apparently downloaded the Alexa toolbar all at once which drove a huge spike in the Digg ranking. He even has a handy Alexa graph pointing out when this occurred.
I think what we get when we look at all the data is just another example of how web measurement is so flawed, and we basically have to take the whole picture when trying to analyze Digg’s place on the web. The summary I get is that Digg is very popular in the technology news space, very popular with Alexa users, and not a top 100 site by any means when it comes to Comscore and the mainstream web. How does this affect Digg’s value? Well, it means they still have a big opportunity to go more mainstream, but it also means that they may have an audience that is very ad averse which makes it hard to drive a ton of ad revenue. Digg is not yet profitable, and that could be a reason why, but I’m guessing they’re still spending a lot to try and grow.
3. Not getting their $150 million offer
Techcrunch also brings up that Digg supposedly tested the waters looking for a $150 million offer or more, but when nobody was biting took the second round of capital instead. I’m not sure this is a huge deal, if it’s true it’s likely that potential acquirer’s saw that Digg’s numbers weren’t as impressive as the hype that surrounds it, and that $150 million was just too rich for their blood. By no means though does it mean Digg is in trouble, they’ll just have to keep working hard to grow into a bigger company that drives real profit.